Purchasing power parity across Mexican cities: a panel data analysis

This article presents three different unit root tests for panel data, the main objective is to find the level of internal integration market through the purchasing power parity (PPP) evidence, based in the Balassa-Samuelson approach. Thus, eight kinds of markets, as tradable and nontradable goods for 16 main Mexican cities during a 21 year period have been contrasted. While two tests showed the PPP validity for seven markets, the other rejected it. The results obtained moreover feed the present controversy about which test is most appropriate to test the PPP, as soon as it is highlighted new elements emerge to explain the half-life analysis.